RBI cancels licence to Dabhoi Nagrik Sahakari Bank

Mumbai, Mar 9 (UNI) Reserve Bank of India has cancelled the licence of the Dabhoi Nagrik Sahakari Bank Ltd., of Gujarat as a final step after examining all the options for revival of the bank and as a step to protect the interest of the depositors.

The decision was taken in view of the fact that the bank had ceased to be solvent and all efforts to revive it in close consultation with the State Government had failed, said a release issued by RBI.

RBI delivered the order cancelling its licence to the bank after the close of business on March 7.

The Registrar of Co-operative Societies, Gujarat was also requested to issue an order for winding up the bank and to appoint a liquidator for the bank, the release said.

It may be highlighted that on liquidation every depositor is entitled to a repayment of his deposits up to a monetary ceiling of Rs one lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

In May 2004, the bank experienced a run on its deposits and on its request , directions were issued under Section 35A of the Banking Regulation Act, 1949 (As applicable to Co-operative Socities) with effect from the close of business of June 14, 2004, prohibiting it from accepting fresh deposits and repayment of deposits was restricted to Rs 500 per depositor.

The inspection of the bank with reference to its position as on September 30, 2004 revealed deterioration in its financial condition, RBI release said. Its deposits were getting eroded as realisable value of paid-up capital and reserve was in the negative.

Thereafter, the Reserve Bank issued a notice to the bank on June 25, 2005 asking it to show cause as to why the licence granted to it to conduct banking business should not be cancelled.

As the bank did not have a viable plan of action for revival and the chances of its revival were remote, RBI took the extreme measure of cancelling licence of the bank in the interest of the bank's depositors.

With the cancellation of its licence and after commencement of liquidation proceedings, the process of paying the depositors of the bank, the amount insured as per the DICGC Act, will be set in motion, the release added.

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